According to the researches of analytical agencies, most of the strategies practiced in the cryptocurrency market refer to the hold. Bidders come to the exchange to buy and hold Bitcoin and/or altcoins. This fact indicates that most traders are beginners who do not practice different strategies to maximize or protect the profits.
The prolonged cryptocurrency collapse in the first half of 2018 showed that the market will no longer give 1000% of profit without a flexible approach to trading:
- Search and select the right entry points
- Use of technical and fundamental analysis
- Learning and implementing algorithmic trading
- Management of funds and trade risks (rules of money management)
Cryptotraders will need to master the basic fundamentals and trading rules which are universal for any assets and work reliably for three centuries of existence of exchanges.
The basis of trading on the cryptocurrency exchanges
The movement of prices in the cryptocurrency market looks chaotic only at first sight. If you look at the graph of the change in the exchange rate of any digital currency, in particular Bitcoin, you can see the cycles – waves of recovery and recession.
Instead of hold strategy – buying and holding the cryptocurrency, a trader can earn “in any direction” by purchasing or selling the cryptocurrency in the trend direction – according to the growth or decline.
Trade in the trend direction is the most common basic strategy. In a simple variant, the trend is determined by the Moving Average (MA) indicator, the moving average is the indicator, built on the average values of the rate for a certain period.
Traditionally, prices for the end of the day and the period of changes from 2 to 200 session closings are taken into consideration. The figure below shows the closing prices of the day and two lines of the MA indicator – a period of 200 days (black color) and 15 days (red color). Both indicators smooth out the chaos of the movements of the blue line of prices, but each of them has its own advantages and disadvantages.
- MA 200 – there are fewer entry / exit points, which are determined by the intersection of the indicator and prices lines, but more loss of profit.
- MA 15 – there are more deals, but many false signals, formed by multiple intersections of indicator and prices lines.
Correct selection of the period value ensures maximum profit. Before trading, a trader must test each gap by selection method – this applies to any strategy and system. This possibility is presented only on the Bistox exchange, where besides the tester you can use the genetic selection algorithm controlled by artificial intelligence.
A neural network launches a set of parameters in the tester simultaneously, rejecting initially unpromising values, which significantly reduces the number of options and speeds up the test time.
Volumetric analysis of the cryptocurrency market
The growth of Bitcoin and Altcoins directly depends on the market capitalization and trading volumes within the day, as it is clearly seen from the figure below. The daily trading volume is represented by a histogram in the “basement” of the graph, and the blue line is the capitalization that correlates with the green price curve.
Growth of average daily turnover or capitalization can serve as an indicator for the search for an entry point, and bursts of a histogram are reliable indicators of a trend reversal. Despite the simplicity and obviousness of this definition, only the apparatus of the implicit logic of neural networks can give qualitative signals to the entry.
Such possibilities are possessed by the artificial intelligence of the Bistox platform, which allows to “keep” always the current values of these indicators, regardless of how the capitalization of digital currencies will change. With each new level of capitalization, a trader would have to wait until the historical data “rush in”, but the Bistox neural network is able to identify “invisible” and implicit relationships.
Trading the news
The rate of specific altcoins and tokens is influenced by corporate news – some digital currencies are able to grow even against the background of a total drop of hundreds of percents if:
- Developers have released a significant update.
- A large company has introduced this currency blockchain into its processes or has signed a cooperation agreement
- The coin hit the listing of the Exchange from the ranking of top 10
Trading the news is relatively safe and easy income. The only problem is that the messages about events that could affect the course are “spread” over thousands of amateur sites. Unfortunately, the cryptocurrency market has no reliable sources of information, and business publications write about digital currencies extremely rarely.
Therefore, traders can only regret about the loss of profits, watching the rate that has already grown.
The Bistox exchange is the first to introduce news ticker – the company’s specialists conduct continuous scoring of social networks and websites of thousands of projects in order to “recognize” upcoming significant events and advise this news to customers.
When you subscribe to the Bistox newsletter, you will only have to buy a token or altcoin, in order to fix speculative profits in three or four days. By the way, the Bistox platform provides a wide range of cryptocurrency traded.
Money Management or Risk Management
Belief in “to the moon” – the endless growth of the market – caused many traders to enter the market on a wave of growth of the cryptocurrency at the end of 2018. Many of them preferred to buy altcoins and tokens (digital currencies issued for ICO) in order to earn more, as their rate varied by hundreds and sometimes thousands of percents in a short period of time.
Many of those who did not concern with limiting losses left without the funds invested, completely unaware that there is a system and tactics for issuing special pending orders fixing the loss and profits.
The main task of a trader is to save the funds before choosing the ideal entry point. It cannot be found immediately, and errors should not be expensive, so there is a system for calculating the level of losses, partial fixation of profits, a tactic for securing output without loss.
It needs to be learned, but the money management systems are worked out during the XX century to automatism, so it is easier to register an account on the Bistox exchange and use artificial intelligence to follow the profit and seeks to break-even trading.